Microsoft Shows Off Its Gaming Ambitions With New Development Stack

Microsoft (MSFT) is flexing its gaming muscles with a new appeal to the development community.

Ahead of next week's Game Developers Conference in San Francisco, the tech giant released details about its Game Stack, a new offering that bundles together various Microsoft services -- including Azure, Xbox Live, App Center, PlayFab and others -- into an all-in-one game development package. Microsoft shares were flat on Thursday, and are up 13% year to date.

"The goal of Game Stack is to help you easily discover the tools and services you need to create and operate your game," wrote Kareem Choudhry, Microsoft's head of gaming cloud, in a blog post. Choudhry described Azure, Microsoft's public cloud, as the "building blocks" of the development stack, with a scale that will make it possible to build and deliver streaming games to a global audience. He added that Game Stack is nonetheless "cloud, network and device agnostic."

The Game Stack is one piece of the puzzle in Microsoft's larger ambitions in gaming, which (if successful) could break the tech giant out of an Xbox-centric, console and PC gaming paradigm.

Later this year, Microsoft will launch trials of its cloud streaming service for games, dubbed XCloud, which the company bills as an ambitious, Netflix-esque service that will allow game streaming on any device. Not coincidentally, Microsoft also released a new demo of XCloud earlier this week.

On a Jan. 30 call with investors, Microsoft CEO Satya Nadella touched on what he views as as the vast opportunities in gaming that Microsoft may be uniquely positioned to capture. For the fourth quarter, Microsoft reported 8% growth in gaming revenue and 31% growth in Xbox software and services revenue on the continued strength of Fortnite.

"We continue to pursue our expansive opportunity to transform how games are distributed, played, and viewed. Our investments in content, community, and cloud services across every endpoint drove both record user engagement and record average revenue per user and contributed to our largest gaming revenue quarter ever, driven by software and services," he said. Microsoft executives also noted that Xbox Live MAUs surpassed 64 million and PlayFab, a platform for cloud gaming development that Microsoft acquired in 2018, surpassed 1 billion accounts.

With an estimated 2.2 billion gamers worldwide, big tech companies such as Microsoft, Nvidia (NVDA) Amazon (AMZN) , Alphabet (GOOGL) and Facebook (FB) are staking out their positions in one of the world's fastest-growing industries. Alphabet is also expected to announce a cloud streaming service for games next week, dubbed Project Stream.

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